A Deal Maker, or Breaker, on Adelphia

In seeking to acquire Adelphia Communications, Richard D. Parsons, the chairman and chief executive of Time Warner, must balance the concerns of his shareholders with the demands of a tough negotiator in the contentious world of bankruptcy investing.

The negotiator, William R. Huff, has a reputation for holding up deals for months if he does not get the price he wants.

He and the other creditors of Adelphia, the nation's fifth-biggest cable operator, will have the final say on any offer for the company.

In bankruptcy proceedings, a majority of each class of creditors must approve a reorganization plan. A single bondholder can block the plan if he or she owns enough of the debt.

Mr. Huff, 54, has not disclosed how much of Adelphia's debt he owns. But funds he manages are said to hold more than $2.5 billion, including a blocking position in the bonds with the first claim on the company's assets after the banks.

And Mr. Huff has never been afraid to use his financial muscle to push for what he thinks he deserves, no matter how long it takes. That has made him unpopular, but has also won his investors, and other creditors, higher returns.

"He is strong-willed," said one investor in bankruptcies who was not speaking directly about this case. "That being said, many of the moves he makes prove to be the right ones."

Mr. Huff, whose firm, W.R. Huff, manages more than $15 billion in junk bonds and other investments out of an office in Morristown, N.J., is expected to keep the pressure on Time Warner and its partner, the Comcast Corporation, to sweeten their offer.

"These are the creditors' assets to own or sell," said Mr. Huff's lawyer, Brad Eric Scheler, a senior partner with Fried, Frank, Harris, Shriver & Jacobson in Manhattan. Mr. Huff declined to comment for this article.

Adelphia's creditors were briefed on Time Warner's offer last Tuesday at a meeting at the Manhattan offices of UBS, Adelphia's adviser. According to people who attended the briefing, the offer came in around $17.5 billion, the price that a committee of bondholders led by Mr. Huff had indicated was the minimum they would accept.

But the structure of the Time Warner-Comcast proposal is complicated. The companies have offered around $12 billion in cash, with the rest to come from stock in Time Warner's own cable business, according to people briefed on the offer.

Mr. Huff and other creditors could take issue with the value Time Warner is placing on its customers, they said.

There is precedent for Mr. Huff to watch every penny. Three years ago, in the reorganization of Telewest, a British cable company, Mr. Huff was adamant that the company's bondholders should receive control of the company in return for forgiving some $7 billion owed to them.

Telewest offered bondholders 97 percent of the stock, but that was not enough for Mr. Huff. He insisted that the company's existing shareholders should receive nothing.

Mr. Huff ultimately agreed to leave the old stockholders with 1.5 percent of Telewest. But the haggling over the other 1.5 percentage points delayed Telewest's emergence from bankruptcy proceedings by close to a year.

The difference didn't amount to that much money, one person involved in the talks said. "But he couldn't let it go. He thought it would set a bad precedent."

Mr. Huff will go to great lengths, including filing lawsuits, when he believes he is in the right. For more than five years, he has had a suit outstanding against Kohlberg Kravis Roberts & Company over its buyout of Bruno's, a supermarket company that filed for bankruptcy court protection in 1998.

Mr. Huff bought Bruno's bonds worth $290 million at face amount, and his funds' investment in the company was wiped out when the company emerged from bankruptcy proceedings in 2000.

After urging an independent examiner to look at the terms under which K.K.R. gained control of the company, Mr. Huff sued K.K.R., accusing it of fraud. After years of litigation over where the case should be heard, the suit is now pending in Federal District Court in Alabama.

A spokeswoman for K.K.R. declined to comment.

Many of the stakes that Mr. Huff's firm has taken in troubled companies, including the stake in Adelphia, were initially made at high prices, at or near 100 cents on the dollar.

In some cases, his patience has been well rewarded. Mr. Huff's investments in Telewest and another British cable operator, NTL, have been highly successful. NTL's shares have risen more than tenfold since it emerged from bankruptcy proceedings. Telewest's shares are up 65 percent from its lows soon after emerging from Chapter 11 last summer.

Some of Mr. Huff's own investors think he has taken too much credit for turning those companies around. At least two state pension funds, in Massachusetts and Florida, withdrew some $600 million from Mr. Huff in recent weeks after learning that he and his partners had accepted $11 million in fees for their role in reviving NTL and Telewest, according to officials at the pension plans.

Mr. Huff has been characteristically stubborn in dealing even with his own investors.

After the Massachusetts fund asked that its share of the bonuses be returned, Mr. Huff hired five lawyers to review the request, according to an account of the pension fund's board meeting three weeks ago.

"We're a client, and I think we've sort of been treated as though we're on the witness stand," said Stanley P. Mavromates Jr., deputy chief investment officer of the Massachusetts Pension Reserves Investment Management, at the board meeting.

It appears that Mr. Huff's remaining investors should do well on the Adelphia investment, but only Mr. Huff knows for sure, because no one else knows the price he paid. The bonds in which other creditors say they believe Mr. Huff's holdings are concentrated now trade well above 100 cents on the dollar, up from as low as 20 cents shortly after Adelphia filed for bankruptcy court protection in June 2002.

Even though Mr. Huff appears likely to be getting more than 100 percent of what he is owed if the Time Warner-Comcast bid succeeds, the complex nature of the offer leaves him room to haggle.

Part of the consideration will be Time Warner's own cable business, in which Comcast has a 21 percent stake. Comcast would spin off that stake as part of its contribution toward the purchase price.

Mr. Huff and other creditors could dispute the values that Time Warner and Comcast are assuming for their cable customers.

"Unless they are willing to pay all cash, he's got some leverage," said one bankruptcy lawyer who has worked with Mr. Huff on other cases.

Also working in Mr. Huff's favor is that Mr. Parsons, the Time Warner chief executive, appears to really want this deal. He is eager, said one person involved in the Adelphia negotiations, to restore his company's reputation as a deal maker after its disastrous merger with AOL in the 1990's.

"Parsons is trying to get past his company's image of paying crazy prices," said one Adelphia creditor.

As a deal maker, Mr. Parsons has sometimes waffled. Last fall, he appeared to have second thoughts after pulling out of the bidding for Metro-Goldwyn-Mayer.

Time Warner investors are watching anxiously to see how much cash the company will put up to buy Adelphia.

"They would prefer that as little money as possible comes from Time Warner," said Richard Greenfield, a media analyst at Fulcrum Global Partners.

Dennis Liebowitz, who runs a hedge fund specializing in media stocks, is skeptical about the value of Time Warner spending more money for cable systems when it is already a powerful presence in that sector.